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on Positive Political Economics |
| By: | Thomas Markussen (Department of Economics, University of Copenhagen); Jean-Robert Tyran (Department of Economics, University of Copenhagen) |
| Abstract: | We present a model of political selection in which voters elect a president from a set of candidates. We assume that some of the candidates are benevolent and that all voters prefer a benevolent president, i.e. a president who serves the public interest. Yet, political selection may fail in our model because voters cannot easily tell benevolent from egoistic candidates by observing their pre-election behavior. Egoistic types may strategically imitate benevolent types in the pre-election stage to extract rents once in office. We show that strategic imitation is less likely if the political system is likely to produce good governance. That is, if benevolent candidates are common, if the president has little discretionary power, and if the public sector is effective. We analyze the role of institutions like investigative media and re-election and show that they can improve or further hamper political selection, depending on the parameters of the political game. |
| Keywords: | political selection; elections; social preferences; political leadership |
| JEL: | D64 D72 D82 H0 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1011&r=pol |
| By: | Maik T. Schneider (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland) |
| Abstract: | We develop a model of legislative lobbying where policy proposals are endogenous. We show that a policy proposer with preferences tilted towards one lobby may be induced by an increase in that interest group's size to propose policies geared towards the opposing lobby. Hence, a larger lobby size can have adverse effects on policy outcomes for this same lobby. This provides another rationale as to why some interests do not organize. Moreover, we find that a second-mover advantage in Groseclose and Snyder (1996)-type lobbying models with exogenous policy proposals can turn into a second-mover disadvantage when the proposal is endogenous. |
| Keywords: | legislative lobbying, vote buying, legislatures, interest groups, political economy |
| JEL: | D72 P16 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:10-126&r=pol |
| By: | Mario Jametti (University of Lugano); Marcelin Joanis (Université de Sherbrooke) |
| Abstract: | This paper empirically investigates the underlying causes of expenditure decentralization, based on the predictions of a new political economy model of partial fiscal decentralization. Under shared expenditure responsibility, the degree of decentralization is endogenous and depends on the relative political conditions prevailing at each level of government. Our empirical results from a panel of democracies support the relevance of political factors as determinants of fiscal decentralization. The relationship between central government electoral strength and both expenditure and revenue centralization emerges as nontrivial and non-linear. Political forces at the central government level driving centralization up and down appear to coexist. |
| Keywords: | fiscal decentralization, fiscal federalism, vertical interactions, partial decentralization, elections |
| JEL: | H77 D72 H11 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2010/4/doc2010-7&r=pol |
| By: | Toke S. Aidt (University of Cambridge); Jayasri Dutta (University of Birmingham) |
| Abstract: | We study the efficient allocation of spending and taxation authority in a federation in which federal politicians are exposed to electoral uncertainty. We show that centralization may, but need not, result in a loss of electoral accountability. We identify an important asymmetry between positive and negative externalities and show that centralization may not be efficient in economies with positive externalities even when regions are identical and centralization does not entail a loss of accountability. We also show that decentralization can only Pareto dominate centralization in economies with negative externalities. |
| Keywords: | Fiscal federalism, local public goods, externalities, performance voting,turnout uncertainty, electoral accountability |
| JEL: | D72 D78 H41 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2010/4/doc2010-11&r=pol |
| By: | Maria Cubel (University of Barcelona & IEB) |
| Abstract: | In this paper we analyze the political viability of equalization rules in the context of a decentralized country. In concrete terms, we suggest that when equalization devices are perceived as unfair by one or more regions, political conflict may emerge as a result. Political conflict is analysed through a non cooperative game. Regions are formed by identical individuals who, through lobbying, try to impose their regional preferences on the rest of the country, and political conflict is measured as the total contribution to lobbying. We conclude that the onset of conflict depends on the degree of publicness of the regional budget. When regional budgets are used to provide pure public goods, proportional equalization is politically feasible. However, no equalization rule is immune to conflict when budgets are used to provide private goods or a linear combination of private and public goods. |
| Keywords: | political conflict, lobbying, equalization grants, social decision rules |
| JEL: | D74 D31 H77 R51 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2010/4/doc2010-9&r=pol |
| By: | FILIPPO BELLOC and ANTONIO NICITA |
| Abstract: | We investigate the political determinants of liberalization in OECD network industries, performing a panel estimation over thirty years, through the largest and most updated sample available. Contrary to traditional ideological cleavages, we find that right-wing governments liberalize less than left-wing ones. This result is confirmed when controlling for the existing regulatory conditions that executives find when elected. Furthermore, governments' heterogeneity, proportional electoral rules, and European Union membership all show positive and statistically significant effects on liberalization. Our findings suggest that, despite the conventional wisdom, the political-economic rationale behind liberalization paths in network industries is far from being assessed. |
| Keywords: | Liberalization - Network Industries - Government heterogeneity and Partisanship - Electoral systems - Panel data . JEL Classification D72, L50, P16, C23. |
| Date: | 2010–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2010/28&r=pol |
| By: | Stephen Calabrese (Carnegie Mellon University); Dennis Epple (Carnegie Mellon University) |
| Abstract: | We study the political economy of state limitations on the taxing powers of local governments, investigating the effects of such restriction on housing markets, community composition, and types of taxes and expenditures undertaken by local governments. We characterize equilibrium when voters choose values of multiple policy (tax and expenditure) instruments, finding that tax limitations have very substantial effects on housing prices and the composition of communities. Political support for tax limits comes from suburban voters and from a subset of central-city voters. Support for tax limits come even from residents of communities that are not constrained by the limits. |
| Keywords: | Tax limits, redistribution, public goods, property tax, income tax, head tax |
| JEL: | D72 D78 H30 H42 H72 H73 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2010/4/doc2010-14&r=pol |
| By: | Francisco Rodriguez (Human Development Report Office of the United Nations Development Programme); Rodrigo Wagner (Economics Department of Harvard University) |
| Abstract: | For how long does cultural heritage persist? Do the culturally inherited values of immigrants dilute as generations pass? We answer these question by studying the relationship between revealed political behavior of immigrant families and the culture of the place where they migrated from, either one or many generations ago. Using surnames as indicators of region of origin of Italians in Venezuela, we study the effect of cultural heritage on two indicators of revealed political behavior: (i) propensity for civic engagement, and (ii) propensity for redistribution. A well established literature documents greater propensity for civic engagement and lower propensity for redistribution among Northern Italians. In Venezuela, we measure the former by turnout before the era of political polarization and the latter by signing behavior against Hugo Chávez in the 2004 recall referendum drive. Despite the fact that the wave of Italian immigration to Venezuela occurred more than half a century before the events studied in this paper, we do not find a greater propensity for civic engagement nor preference against redistribution among descendants from Northern as opposed to Southern Italians, suggesting that cultural assimilation may be a strong determinant of political behavior in the long run. |
| Keywords: | Social capital, political incorporation of immigrants, family economics, redistribution, political preferences, civic engagement, Latin America |
| JEL: | Z1 F22 P26 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:hdr:papers:hdrp-2009-40&r=pol |
| By: | Sigrid Roehrs (University of Zurich); David Stadelmann (University of Fribourg) |
| Abstract: | Mobility may undermine local income redistribution in federal systems,because rich taxpayers can evade high taxes by moving to low tax jurisdictions. By analyzing a model of local income redistribution with endogenous voting, income heterogeneity and an exogenously given degree of mobility we focus explicitly on the link between redistribution and mobility. Our findings suggest a nonlinear relationship between redistribution and mobility: high and low degrees of mobility permit major income redistribution as income sorting is absent, while a medium degree of mobility leads to high differences in tax rates between jurisdictions and thus to income sorting and less redistribution. |
| Keywords: | Redistribution, political economy, locational equilibrium, taxes, tax havens |
| JEL: | H23 H71 H73 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2010/4/doc2010-4&r=pol |
| By: | Andrew CLARK (Paris School of Economic, Paris, IZA, Bonn); Emanuela D'ANGELO (Universita' Politecnica delle Marche, Dipartimento di Economia) |
| Abstract: | The paper uses 15 waves of BHPS data to provide an integrated analysis of the roles of both individual social status and upward mobility relative to own parents on job and life satisfaction, preferences for redistribution, pro-public sector attitudes and voting. Both greater individual social status and greater mobility with respect to parents are associated with higher levels of satisfaction. However, this symmetric effect disappears for political preferences. While greater social status is associated with less favourable attitudes to redistribution and the public sector, greater upward mobility is associated with more Left-wing attitudes. These attitudes translate into actual reported voting behaviour. Upwards social mobility produces satisfied Left-wingers. |
| Keywords: | Inequality, Redistribution, Satisfaction, Social Mobility, Voting |
| JEL: | A14 C25 D31 D63 J28 J62 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wpaper:338&r=pol |
| By: | Miguel Rocha de Sousa (Universidade de Évora, Departamento de Economia e NICPRI-UE) |
| Abstract: | We justify why a single seat from European members in international fora might be preferable than a multitude of seats. Leech and Leech (2005), Eichengreen (2008) proposed this reform at the IMF. Why? Even though nowadays European Union has an aggregate voting power that is higher than its? respective (expected) share in world output or population weight; If the single seat is obtained, more coordinated expected outcomes can be achieved. This line of reasoning is compatible with the single mindedness theory created by Mulligan and Sala-I-Martin and further extended by Canegrati. Focusing in one policy gives more political power for the single European seat. |
| Keywords: | Coordination, EU, International Organizations Reform, IMF, Political economy models, Single European seat , Single mindedness theory, Voting power. |
| JEL: | D71 D72 D78 F33 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:evo:wpecon:2_2010&r=pol |
| By: | Linda Gonçalves Veiga (Universidade do Minho - NIPE) |
| Abstract: | The paper examines the determinants of the assignment of EU funds to Portuguese municipalities using a large and unexplored dataset covering all (278) mainland municipalities over fifteen years. Empirical results reveal that besides normative objectives, the national government also takes into account political motivations in the distribution of funds to municipalities. Grants increase during local election years, more funds are transferred to municipalities where the government party had higher percentages of votes, and where there are more swing voters. |
| Keywords: | Fiscal federalism, political economy, local governments, EU funds, Portugal. |
| JEL: | D72 H72 R58 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:11/2010&r=pol |
| By: | Alejandro Esteller-Moré (Universitat de Barcelona & IEB); Leonzio Rizzo (Università di Ferrara & IEB) |
| Abstract: | We test for the state interdependence of gasoline and cigarette taxation in the US (1975-2006). We estimate a tax reaction function, and find that state interdependence is due solely to yardstick competition, since any interaction disappears completely in the case of states with lame duck governors. This result holds for both taxes: the short-run reaction of those states whose governor is eligible to stand for reelection is 0.13 and 0.21 for gasoline and cigarette taxation, respectively. In the long run, the cigarette tax rates levied in a jurisdiction match those of its neighbors perfectly, while the long-run reaction in the case of gasoline is much lower at 0.72. |
| Keywords: | Tax competition, political accountability, excise taxes |
| JEL: | H71 H77 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2010/4/doc2010-3&r=pol |
| By: | Alejandro Esteller-Moré (Universitat de Barcelona & IEB); Umberto Galmarini (Università dell'Insubria); Leonzio Rizzo (Università di Ferrara & IEB) |
| Abstract: | We examine the tax assignment problem in a federation with two layers of government sharing an elastic tax base, in which Leviathan policy makers levy an excise tax in an imperfectly competitive market and producers lobby for tax rate cuts. If the lobby of producers is very influential on policy makers, we find that taxation by both layers of government might be optimal, provided that the market of the taxed good is highly concentrated; otherwise, it is optimal to assign the power to tax only to one level of government. Taxation by both layers of government is not optimal either when the influence of the lobby is weak, whatever the degree of market power. We also examine a richer set of tax setting outcomes, by considering the possibility that state policy makers have heterogeneous tax policy objectives. |
| Keywords: | vertical tax externalities, tax assignment, lobbying, specific taxation |
| JEL: | H71 H77 D70 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2010/4/doc2010-8&r=pol |
| By: | Marieke Kleemans (Department of Agricultural and Resource Economics at the University of California, Berkeley); Jeni Klugman (Human Development Report Office of the United Nations Development Programme) |
| Abstract: | Migration is a controversial issue. Reading of the popular media in virtually any country, alongside an array of opinion polls suggest that residents see controls on immigration as essential and that people would prefer to see existing rules on entry tightened rather than relaxed. This stands in contrast to the evidence which points to significant gains for movers and, in many cases, benefits also for destination and origin countries – as reviewed in the forthcoming Human Development Report 2009. This paper makes several important contributions to an already rich literature about public opinion and migration. It highlights that attitudes are not as monochrome as might initially appear. A more detailed analysis of the nature, patterns and correlates of opinions toward migration in both developed and developing countries shows that values favourable toward diversity are in fact widely held, albeit with important variations. We also cast important light on how policies toward migration and underlying structural characteristics affect attitudes. Moreover, as many migrants do not end up in developed or OECD countries, public opinions in developing countries are of interest. As far as we are aware, this paper is the first published attempt to explore attitudes in countries in all parts of the human development spectrum. While the data investigated is largely drawn from 2005/2006, we frame key questions in both a longer term perspective, and highlight attitudes towards migrants when jobs are scarce, which has heightened relevance during periods of recession. |
| Keywords: | Immigration, human development, public opinion |
| JEL: | O1 O15 F2 F22 J1 J15 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:hdr:papers:hdrp-2009-53&r=pol |
| By: | Catherine Bros (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, CSH - Centre de Sciences Humaines) |
| Abstract: | A vast recent literature has stressed social fragmentation's negative impact on the provision of public goods. It has been established theoretically that social fragmentation engenders discord and thereby undermines public goods provision. Empirical research has produced mixed results about this relationship. On the one hand it rarely holds for all the goods and on another hand it appears attenuated at the micro-level. Three points ought to be considered. First, the negative role attributed to social fragmentation rests upon the actuality of a relationship between social antagonisms and ethnic diversity. Yet, such an actuality is to be proved. Second, should such a relationship exist, polarization indices would be more appropriate than the traditional fractionalization index used so far in the literature. Third, theoretical works have set aside the possibility of ethnic patronage in accessing public goods. Nevertheless, it is a central issue as patronage is common in developing countries. In this event, a positive relationship could be found between social fragmentation and the presence of public goods. This article aims at showing that such a positive relationship does exist, at least in parts of India, as a consequence of caste patronage. It also shown that polarization is irrelevant as social antagonisms do not seem to be an obstacle to the provision of public goods. |
| Keywords: | Political economy, patronage, public goods, collective action, inequality, caste, India. |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00476016_v1&r=pol |
| By: | Neustadt, Ilja; Zweifel, Peter |
| Abstract: | The sustainability of the welfare state ultimately depends on citizens' preferences for income redistribution. They are elicited through a Discrete Choice Experiment performed in 2008 in Switzerland. Attributes are redistribution as GDP share, its uses (the unemployed, old-age pensioners, people with ill health etc.), and nationality of beneficiary. Estimated marginal willingness to pay (WTP) is positive among those who deem benefits too low, and negative otherwise. However, even those who state that government should reduce income inequality exhibit a negative WTP on average. The major finding is that estimated average WTP is maximum at 21% of GDP, clearly below the current value of 25%. Thus, the present Swiss welfare state does not appear sustainable. |
| Keywords: | Income redistribution; welfare state; sustainability; preferences; willingness to pay; discrete choice experiments |
| JEL: | D63 H31 D12 H29 C35 C93 |
| Date: | 2010–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22233&r=pol |